Bottom-fishing? Hang on, let market settle: Jhunjhunwala

Indian equity benchmarks got butchered once again as investors feared a worldwide sell-off on talks that S&P may downgrade other countries and companies post US downgrade.

The 50-share NSE Nifty slipped below the 5000 mark for the first time since June 2010.

Speaking to CNBC-TV18, Jhunjhunwala said, the current market turmoil signals the end of the global financial crisis. "It may take another two or three-years, however, this definitely looks like the beginning of the end," he said.

According to Jhunjhunwala, markets may see a good uptick in the medium-term. However, he advised against bottom-fishing at current levels. "I think watching the market rather than anticipating it for the next five-seven days is the best idea," he advises. 

Below is the edited transcript of Rakesh Jhunjhunwala's exclusive interview on CNBC-TV18. Also watch the video.

Q: Do you think Nifty will be able to find support at 5000?

A: It's a highly volatile situation. So rather than trying to anticipate where we will find support, let us see where it actually finds the support. We will only know that when it stops falling, goes up to a certain point, and again falls.

Q: Does that mean you are not confident that the Nifty is going to hold on to these levels? Do you think it can slip to those 4,700-4,800 levels that some of the technical guys have been talking about?

A: I am not saying it might not hold on at these levels and will not go up, but I would not like to anticipate it. I would not like to preempt it.

I think watching the market rather than anticipating it for the next five-seven days is the best idea because it's an extremely volatile time and bottom-fishing at these levels, or at any levels is, not what I personally think is something what one should do.

Q: What would convince you, looking at the screen, that the market is putting in some kind of a bottom?

A: I can talk about short-, medium- and the long-term. In the short-term, I personally feel that's what is happening and what is coming as a surprise everyday — downgrades, European problems, high inflation. So, the market has had a fall and broken its bottom after humongous resistance.

I don't think that you are going to make a bottom and recover. I will be surprised that if you make a bottom and you recover very fast. Even if you make a bottom, market will give you a chance again, it will consolidate. I don’t see it will shoot up fast.

I am hopeful [that] over the medium-term if factors turn favourable — oil prices, monsoon, and some is there stabilisation worldwide — then markets could have a good rise.

In the long-term, I have to two opinions. First one I think about America or Europe. I think it is very good that all problems are brought to the front. All the problems were known but people wanted to forget them in their bullishness. I always use to point out: Be aware of what is going to happen in the western world.

I have great admiration, especially for America. If problems come to the fore in America, they will get solved. I would say, this could be the beginning of the end of the crisis. The end could take two-three years but once people get confidence that it is the beginning of an end and immediate measures are being taken, I think markets will react very favourably.

The more you push the problem ahead, the greater problem there was going to be later. I think solutions will be found and it good that it has come to the fore. However, the interim period — how long it will take for the markets to regain confidence and what kind of pain — is still something we cannot anticipate rightly — only time will tell.

As far as India goes, people are raising some doubts about India's capacity to grow. It is not without reason. However, being in the democracy that we are, the remedial measures that have been taken — because the executive did not do his job well, you have the Supreme Court, CAG, the Reserve Bank pointing out things and that happens in any democracy.

I think Indian democracy is maturing. It has matured. It is good also that in India these problems have come to the fore. India will take corrective measures. I have full confidence — it may take two-three years but it won't take more than four years — when India will have double digit growth.

I am absolutely convinced and extremely bullish on India as I ever was in the long-term.

Q: How much time do you think it will take before — despite what the West is going through and if they take a bit longer to sort their problems out — at what point do you think India starts outperforming in a relative sense because it has digested its share of the pain because of local factors?

A: India has always outperformed. When the Dow was 13,000-14,000, the Sensex was 3,000. Today, the Dow is 11,000-11,500 and the Sensex is (more than) 15,000. Now, how long it will take and what will happen in the Western world is a difficult call. But the realisation that something has to be done — and the market’s confident that it will be done — will be a point where markets will gain confidence.

If you look at the America's price to earnings ratio, it’s unbelievable. You have a Microsoft [priced] at 10 times earnings, Intel at 9 times earnings. Then you have a true bear market where the yield on the Dow is greater than yield on the government bonds and by large measures. This partly reflects the lack of confidence in the future of the US economy. A lot of these companies are getting their revenues largely internationally.

Apple, Microsoft, P&G and Intel have got very large international revenues —every company [US company] has got large international revenues. As soon as market realise that whatever is needed to be done is been done and will be done.

It will done because I see some of the speeches made by the presidential hopefuls and all of them are feeling — Americans are feeling that we have lost our prestige; we will lose our military power and the dollar is being attacked. America is extremely patriotic nation. The moment Americans realise that they will do something, which will solve the problem.

I think you should ask yourself the question: Is the crises in the system or is the crises of the system? I believe it was crisis of the system when Lehman Brothers failed. Now, I think its crisis in the system.

How long it will take? As an investor, I cannot say but it will happen. It may take 12 months or 24 months or it may take 36 months but no doubt in the Western world consumption has to go down and growth has to slow.